COMMERCIAL MORTGAGE

What is a Commercial Mortgage?

A commercial property mortgage is very much the same as a residential mortgage but differs in that it is secured against a property used for business instead of a property that is a home where someone lives.

Every UK business needs premises and if you decide not to rent or lease, but to buy a property, then you will probably need a commercial mortgage or loan to help you.

There are both advantages and disadvantages of buying instead of renting and you should know what these are before seriously considering commercial mortgages.

We Can Help You

Give us a call and an expert mortgage adviser from our specialised commercial broker will call back to advise you on what is best for your particular situation. Their advice is free and impartial and is totally without obligation. They can contact the top lenders to find the most competitive rate and get you the best deal to buy a new property or to refinance an existing property.

The Benefits

As your mortgage repayment is likely to be similar to the rent on a similar sized property it makes business sense to consider the benefits that can be obtained by purchasing the property with a loan instead.

Using this type of mortgage to raise finance means that you still retain control of your business and premises. If you raise finance though outside investment in your business then you may have to give up some of your ownership to the investor.

There may even be some fundamental reasons why you might need to purchase a property for your business. If you are starting a business you may find that your business cannot exists unless you have a particular type of property such as hotel, garage, shop, restaurant or pub.

If your business has existed for some time and is now doing well you may be looking for bigger or additional business premises or even an extension to allow your business to continue to expand.

Buying your own property can protect you from future rent increases and avoid the tie in that a rental agreement might have. Also if commercial property values are rising then you will have a valuable asset that will appreciate over time. As your equity in the property increases then you will be able to borrow more money against it if you need to.

Commercial loans are also available for investment in residential and commercial property and for property development. They are generally thought to be the most effective way to buy land or property for business purposes.

There is of course a major tax advantage of using a business mortgage because the interest payments on your mortgage are tax deductible.

What is Available?

A commercial mortgage broker or lender can arrange and supply loans for many business types from sole traders and partnerships to limited companies and the self employed.

Mortgages can be arranged even if you have problems proving your income or if your credit situation is not quite what it should be.

Lending Criteria

Above all the business should be creditworthy and you should have a financially proven business plan that you can show to a lender to convince them that you will not have a problem making your mortgage repayments. You may also to have to provide audited accounts and other relevant documents to further support your case.

As always companies in commercial lending will examine the difference between the value of the property and your potential borrowing. You will be expected to make up the shortfall by putting down a relevant deposit.

How much is expected will depend on the lender, the type of property and your current business performance. Normally this would be between 20% and 30% of the valuation price, but some lenders may be a little more flexible.